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## Reinsurance 6.01 Insurance entities bring together people and entities subject to insurable hazards and collect premium amounts expected in the aggregate to be sufficient to pay all losses sustained by the insureds during the policy periods, in addition to acquisition, settlement, and administrative costs and a return on the capital employed. From the insurer's perspective, the number of insureds must be large enough and diverse enough for the statistical properties of the law of large numbers to operate effectively. However, frequently an insurance entity may be offered or may accept, for business reasons, insurance of a class or amount that does not permit the law of large numbers to operate or that could result in claims that the insurer does not have the financial capacity to absorb. Such risks are spread (or ceded) among other insurance entities through reinsurance, which is the indemnification (or assumption) by one insurer of all or part of a risk originally undertaken by another insurer. ## ©2019, AICPA AAG-PLI 6.03 Property and Liability Insurance Entities 6.04 In addition to private reinsurance entities, reinsurance coverage can also be obtained from certain government

Author

American Institute of Certified Public Accountants

Publisher

Wiley & Sons, Limited, John

Published

2020

Language

EN

ISBN

9781948306843